France’s staggering public sector liabilities could trigger a financial crisis threatening the entire European Union, with a leading analyst warning that only an unprecedented intervention by Brussels could prevent disaster. Tax consultant Bob Lyddon estimates that France would need €1.8 trillion (£1.6 trillion) over two years if its public sector borrowers were shut out of financial markets, leaving European leaders facing a potential rescue operation on an extraordinary scale.
Mr Lyddon warns that the eurozone’s existing bailout fund would be incapable of covering the bill, leaving the EU itself to borrow the money to prevent France’s financial collapse. In an analysis published on October 7, he estimates that France’s total public sector liabilities, including debts and contingent liabilities, amount to 169% of its gross domestic product (GDP).
Mr Lyddon said: “The total, comprising debts and contingent liabilities, is 169% of France’s GDP.”
His estimate uses year-end 2021 figures and the methodology employed in his 2023 book examining the hidden liabilities of EU member states.
The warning comes as the EU faces the prospect of having to protect one of its largest economies from a financial shock that could spread across the bloc.
Mr Lyddon said a potential assistance programme would have to assume French public sector borrowers were unable to access financial markets for at least two years.
He said: “During that time all maturities would have to be rolled over, and the national fiscal deficit would have to be financed annually as well.”